A. Mohan Alankamony ORDER
A. Mohan Alankamony, Member (A)
1. This appeal is filed by the assessee aggrieved by the order of the Ld. CIT(A) in ITA No. 0065/CIT(A)-3/15-16, dated 4/6/2016 passed U/s. 250(6) r.w.s. 143(3) of the Act for the AY 2012-13.
2. The assessee has raised several grounds in his appeal however the cruxes of the issue are that:-
(i) The Ld. CIT (A) has erred in confirming the order of the Ld. AO who has disallowed the claim of deduction U/s. 54F of the Act.
(ii) The Ld. CIT (A) has erred in confirming the order of the Ld. AO who had levied interest U/s. 234A, B & C of the Act.
3. The brief facts of the case are that the assessee is an individual engaged in the business of selling mutton and sheep, filed his return of income for the relevant AY on 31/3/2014 declaring his total taxable income as 1,78,000/-. Initially the return was processed U/s. 143(1) of the Act, subsequently the case was taken up for scrutiny under CASS and thereafter the assessment was completed U/s. 143(3) of the Act on 13/1/2015 wherein the Ld. AO disallowed the claim of deduction U/s. 54 of the Act.
4. During the course of scrutiny assessment proceedings, it was observed that the assessee had admitted sale of his 1/3rd share in the immovable property at Rs. 12,42,895/- and after claiming indexed cost of acquisition the assessee had computed the LTCG at Rs. 7,90,534/-. Further the assessee claimed deduction for the amount of Rs. 7,90,534/- u/s. 54F of the Act. However, the Ld. AO observed that the assessee had claimed deduction U/s. 54F of the Act with respect to the new semi finished residential house purchased vide sale deed executed on 19/12/2012 in the name of the assessee's son for Rs. 26 lakhs. It was further observed that the assessee's son had purchased the new residential house from the loan obtained by him from HDFC Bank. The Ld. AO opined that since the sale proceeds were not deposited in the capital gain scheme account and also the new asset purchased was not sourced from the sale consideration received by the assessee, the assessee is not eligible for deduction U/s. 54F of the Act. On appeal, before the Ld. CIT (A) the assessee had made the following submission:-
"(i) The assessee had paid advance of Rs. 12,51,000/- towards purchase of residential house property on 6/6/2012 to Shri Ramachandra Reddy and an unregistered sale agreement was also executed on 06/05/2012.
(ii) The property was subsequently registered in the name of his son Shri Ram Shivaji Goulikar on 19/12/2012."
5. However, the Ld. CIT (A) rejected the submission of the assessee and confirmed the order of the Ld. AO by observing as follows:-
"4.3 From the careful. observation of agreement of sale dated 6.5.2012. end sale deed 19.12.2012, the following Discrepancies are noticed
(I) There is no date of issue of stamp paper on the deed of agreement, of sale dated 5.5.2012.
(II) It clearly appears that this agreement of sale dated 6.5.2012 is fabricated to create an evidence that the appellant advanced an amount of Rs. 12,51,000/- so that he will be entitled to benefit u/s. 54.
(III) Clause of page (2) of this agreement read as under:
Whereas in pursuance of the aforesaid offer and acceptance, at the request of Vendor the purchaser had paid a sum of Rs. 12,51,000/- (Rupees Twelve Lakh Fifty One Thousand Only) towards advance and part payment on 06-05-2012 to the Vendors hereby admit and acknowledge. And the remaining amount of Rs. 13,49,000 ( Rupees Thirteen lakhs Forty Nine Thousand Only) will be paid after (45) days from the advance amount date i.e. at the time of Registration. The vendor agreed to execute the regd. sale deed in favour of Purchaser or his/their nominees.
(iv) In sale deed dated 19.12.2012, no reference Is made to the advance paid of Rs. 12,50,000/- on 6.5.2012;
(v) As per sale deed the property was purchased by appellant's son for r an amount of Rs. 26,00,000/- by obtaining loan from HDFC Bank. As per the loan agreement with HDFC between appellant's son and HDFC, loan sanctioned was Rs. 22 lakhs.
(vi) In the sale deed no reference is made to the agreement of sale dated 6.5.2012.
(vii) As per agreement of sale the amount payable to the seller was Rs. 13,49,000/-. However, as per the sale deed amount paid was Rs. 26,00,000/-, which dearly indicated that no advance whatsoever was paid by the appellant to Sri P. Ramachandra Reddy seller of the property at Boduppal.
(viii) No evidence was submitted by the appellant having paid any advance to Srl. P. Ramchandra Reddy. It was further claimed that the amount was received in cash and paid in cash.
5. In view of the above discrepancies, I am of the considered opinion that no advance of Rs. 12,51,000/- was paid by appellant to Sri P. Ramachandra Reddy. In fact such claim is only an afterthought of the appellant during the appeal proceedings. As per the return of income according to assessee the capital gain was only Rs. 7,94,534/- which was claimed as exempt. Therefore, in the absence of any evidence of payment of advance of Rs. 12,51,000/- and also due to unexplained discrepancies mentioned above, the action of the AO in denying benefit u/s. 54 is confirmed."
6. Before us, the Ld. AR submitted that the entire sale proceeds were utilised for the purchase of the residential house property in the name of his son. The Ld. AR also relied on the decision of the Hon'ble Delhi High Court in the case of CIT-Tax-XII vs. Kamal Wahal reported in MANU/DE/0134/2013 : 351 ITR 4 wherein it is held that the benefit of deduction U/s. 54F of the Act shall be available to the assessee even if the new residential house is purchased in the name of his spouse. The Ld. AR further submitted that the loan was obtained from the HDFC bank subsequent to the payment made for purchase of the property and therefore the source for the purchase of the new residential property was from the sale proceeds of the asset sold by the assessee. It was further submitted that the new asset was purchased by the assessee within the due date of filing of the return and therefore there was no statutory obligation to deposit the sale proceeds in the capital gain scheme account. It was therefore requested that the benefit of deduction U/s. 54F of the Act may be granted to the assessee. The Ld. DR on the other hand relied on the orders of the Ld. Revenue Authorities and prayed for confirming the same.
7. I have heard the rival submission and carefully perused the materials on record. From the facts of the case it is apparent that the sale proceeds received by the assessee was utilised for purchase of the new residential property in the name of his son. The new asset is also purchased within the due date of filing of the return by the assessee. Therefore, as pointed out by the Ld. AR the assessee was not bound to deposit the sale proceeds in the capital gain scheme account. Further the bank loan obtained by the assessee's son from the HDFC Bank does not appear to be the source for the purchase of the new residential house by the assessee's son. Violations made by the assessee's son with respect to the terms of loan agreement entered with HDFC Bank towards the purchase of the residential house is of no relevance as far as the Income Tax Act is concerned for granting deduction U/s. 54 of the Act. Penal action against such violation if any has to be initiated by the Bank, as per the Banking Regulations Act or as per the terms of the agreement between them and not by the Revenue. Moreover, the case decided by the Hon'ble Delhi High Court cited supra has also held that "wherein the assessee purchases new house in the name of his wife and not in the name of any stranger who was unconnected with him, exemption cannot be denied if entire investment had come out of proceeds of old property". From the above it is clear that the assessee has not violated any of the provisions mentioned in section 54F of the Act in order to be denied for the benefit of deduction. Therefore, I hereby set aside the order of the Ld CIT (A) on the issue and direct the Ld. AO to grant the benefit of deduction U/s. 54F of the Act to the assessee. As regards the charging of interest U/s. 234A, B & C of the Act, I hereby confirm the order of the Ld. CIT (A) because the levy of interest is consequential in nature and mandatory.
8. Before parting, it is worthwhile to mention that this order is pronounced after 90 days of hearing the appeal, which is though against the usual norms, I find it appropriate, taking into consideration of the extra-ordinary situation in the light of the lock-down due to Covid-19 pandemic. While doing so, I have relied in the decision of Mumbai Bench of the Tribunal in the case of DCIT Vs. JSW Ltd. In ITA No. 6264/M/2018 and 6103/M/2018 for AY 2013-14 order dated 14th May 2020.
9. In the result, appeal of the assessee is partly allowed.
Pronounced in the open court on 24th July, 2020.
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